INDUSTRIAL INNOVATION: ACARD REPORT

HL Deb 28 March 1979 vol 399 cc1588-638

3.12 p.m.

Lord GREGSON rose to call attention to the report of the Advisory Council on Applied Research and Development (ACARD) on industrial innovation; and to move for Papers. The noble Lord said: My Lords when I placed this Motion on the Order Paper for today, little did I realise the competition for attention that we would have from another place. Nevertheless, I believe that the ACARD report on industrial innovation is a very important and timely contribution to the solution of the fundamental problems which are facing this country; and I pay tribute to the advisory council and their chairman, my noble friend the Leader of the House, for their foresight in setting up the sub-committee to produce this excellent, wide-ranging and penetrating report. In fact, I might say that I had some considerable difficulty in applying any critical approach to it at all.

Before I comment on the report I think I should, in opening this debate, set the scene on a wider front and outline some of the problems that make this report so important and apposite. There can be no doubt of the universal necessity for the industry of the developed countries of the Western World to keep ahead of their competitors with tomorrow's technology, and this becomes more essential and urgent when we recognise the speed with which the leading developing countries, like Korea, Taiwan, Brazil, et cetera, are adopting today's technology and are forcing the developed countries out of their traditional markets. It must also be recognised that there is no market whatsoever, at any time, for yesterday's technology, and I hope that this debate will do something to ensure that industry in the United Kingdom shall not be left stranded on the dried up sandbank of yesterday's technology.

Coming nearer to hand, my Lords, the EEC Commission in Brussels has for some time recognised the constant problems that exist for its member countries to stay in the market-place. In January 1977 the Commission asked Dr. Brunner to act as chef de file for a discussion in the area of industrial innovation; and I should like to quote from the preamble to the first discussion document: The problem of innovation for the Community arises from certain very bleak trends, both world-wide and internal. On the one hand, the Community is deficient in raw materials, especially oil and, if not in food, fertilisers. Indeed, not even the world as a whole, however organised, can continue to expand its consumption of scarce raw materials and energy indefinitely. Moreover, previously under-developed countries with considerable reserves of cheap and intelligent labour and of raw materials are beginning to make more complex and technical products and services for themselves and for us. So the Community will rapidly be compelled to offer different services and products for export—in competition with other, technologically advanced societies—to pay for what it needs. But it will have to achieve this while keeping strategic industries and activities viable at home and as competitive as possible abroad. At the same time, the expectations of our already wealthy European society are continuing to increase against a background of economic growth which will certainly remain low for some considerable time. All in all, Europe and the European Community cannot settle comfortably into their own chosen rhythm or pattern of innovation; and it is a public and community interest to encourage particularly innovations which permit people to live better without thereby consuming more scarce raw materials or energy. A high level of innovation is required, but under precisely the economic conditions which make it most difficult to achieve: because of the risks associated with innovation investment and because of public attitudes and problems of confidence, particularly in a period of greatly reduced economic circumstances". If we examine the position of the United Kingdom in the light of that statement, we see the problem being both more severe and of much longer standing. It is now universally recognised that for at least the past two decades the wealth-producing manufacturing industry in this country has been shrinking relative to other activity. Whether this is measured by relative employment, export performance or import penetration, they all tell the same story. Between 1970 and 1976, while total employment in the United Kingdom increased, employment in manufacturing industry declined by over 1 million people; and between 1960 and 1977 the United Kingdom manufacturing industry saw a reduction in its world trade position, falling from over 16 per cent. in 1960 to just above 9 per cent. in 1977. It is the same with import penetration: in 1970, manufacturing exports exceeded imports by roughly £6 billion at 1977 prices; today, that figure is approximately £1 billion, and there is every expectation that it will be zero by 1980.

That decline in manufacturing performance was, in the main, in private manufacturing industry, and it has been shown to have been relatively unaffected by the political persuasions of the Government of the day. That is a sombre picture, indeed, my Lords, but it is one which is almost completely masked by the recent exploitation of our liquid hydro-carbon resources; and this is a very dangerous illusion, since these resources are available for only a comparatively short term. I hope that we shall learn from the problems facing the Dutch following the peak-out of their North Sea gas. There is no quick, easy solution to our problems, and the industrial strategy aimed at regeneration of the manufacturing industry being pursued by the Government, particularly through the sector working parties, seems the only solution. I believe this report to be an important contribution.

Now, my Lords, turning to the report, there is a good deal of emphasis within the report, and rightly so, on the urgent attention that is required to the question of the small company. I know that the Government are giving a good deal of their attention to this problem. Also, since the ACARD Report was published, a recent report of the committee chaired by my right honourable friend Sir Harold Wilson on the financing of small firms has been published. I think that these two reports should be looked at very carefully in parallel. As I have said, I think that the small company sector is important, but I also think that we must remember that if we accept the Bolton Committee definition of small companies, they represent less than 25 per cent. of manufacturing industry in this country. I should like, therefore, to concentrate my comments on the report to the other 75 per cent., recognising that within that 75 per cent. the great majority of British industry is in the medium-sized companies; and these, I believe, require some attention.

My Lords, before doing so, there is one area that was not covered by the Wilson Committee; that is taxation. I believe that this was outside its terms of reference but I have no doubt whatsoever that later in the debate we shall hear this question raised. But I would ask the Government to look carefully at paragraph 4.4 of the ACARD Report. This deals with taxation problems of short-term losses and possible failures. It is important, I think, to remember when attempting the exploitation of innovation that there are many obstacles in the path. I think it is a touch of sadism to penalise in retrospect those that stumble on the way. With regard to the medium and larger companies in the manufacturing sector, I think the report clearly brings out that our real weakness is not in the field of discovery and invention but in exploitation, which is a complex, step-by-step process which encompasses a wide span of activity from research to marketing.

The report makes many recommendations for assistance in various areas by the Government and their agencies, the majority of which I support. But it is well to remember that manufacturing industry in this country is largely in the private sector. I think that the committee could have spent some time in dealing more fully with some of the questions that are posed regarding industry itself in paragraph 1.2 of its introduction instead of passing them over for wider consideration in the NEDC and the sector working parties.

I would particularly recommend that further consideration should be given to at least three of these problems since I believe they could lie at the root of our malaise. Firstly, there is the problem of the concentration of British management on short-term returns being out of phase with the longer-term requirements of modern technology. This is particularly so with companies quoted on the Stock Exchange who are expected to demonstrate an improved performance in profits at least on a six-monthly basis. I think that there is room here for some serious consideration by the institutional shareholders who now dominate the equity scene, and I would hope that the Wilson Committee in its final report will give some consideration to this.

The second problem which is stated concerns the lack of trained engineers and designers. I would extend this from my own experience to include all technologists. This is an acute and serious problem which is acting as a major constraint on the expansion of industry in this country. It is not only a problem in the United Kingdom but (as we have recently seen from the many reports) it is also occurring on the much wider international scene. I hope that the Finniston Committee which is due to report shortly may provide a basis for a proper consideration of this serious problem.

The third problem concerns the structure and organisation of the majority of British industry and a lack of technical competence in the boardrooms. This has been raised on many occasions by my noble friend Lord Brown and has recently been the subject of a very detailed report to the NEDC by Mr. K. G. Corfield. I understand that this report has now been made generally available and I would hope that British industry would take a long hard look at this problem. Despite my few comments, this is a most excellent and timely report. I hope the Government will receive it with enthusiasm and that the report will be widely read throughout the country. If I might say so, if necessity is the mother of invention, I would hope that dire necessity would give rise to "invention squared". My Lords, I beg to move for Papers.

3.27 p.m.

Lord CARR of HADLEY

My Lords, I am sure that you would wish me first to thank the noble Lord, Lord Gregson, for raising this subject today. There can be no doubt that to increase the rate of industrial innovation in Britain is of absolutely crucial importance to our future strength and prosperity. It is, therefore, a most important subject. May I also say how much we look forward to the maiden speeches later in the debate from the noble Lord, Lord Schon, and the noble Lord, Lord Rugby. I can assure them in advance that they will not find the experience as intimidating as they perhaps might feel it to be at the moment. We look forward to what they have to say to us.

The noble Lord, Lord Gregson, set the scene and, if I may, I want to concentrate more closely on the actual report to which he drew attention. I am afraid I did not find it quite so difficult to criticise as he did. I read the report with great interest but, I am bound to say, with some bewilderment—and I was almost going to say "with some dismay". In the main text of the report, the working party seem to me to put their fingers on what are the most fundamental issues; and with their analysis I find myself in a large measure of agreement. I think it is important and I think it is essentially right.

However, the recommendations summarised in pages 7 to 10 (the first chapter after the foreword) strike me as strange and, in total, extremely disappointing and inadequate. They do not match up in substance to the terms of reference that the working party were given; they do not match up to the real problems of some companies and the need to create a thriving small business sector, both of which are, rightly, so strongly stressed in the foreword of the report. Moreover, their recommendations in total do not get to grips with the fundamental issues which the working party themselves perceive and define so clearly. The recommendations in total are too timid, they are far too much concerned with tinkering with the mechanisms of a governmental or of a semi-governmental kind rather than dealing with what is required to bring about the fundamental change in our economic and industrial environment, which is what is needed and which they themselves diagnose as being needed.

In the nature of their content, the recommendations seem to be far more concerned with what can be done to ameliorate the effects of the present unsatisfactory economic environment than with what needs to be done actually to change this environment and to create a good growing climate for innovation in general and for innovative small firms in particular. In this, I repeat, the recommendations fail to reflect properly what appear to be the working party's own basic convictions and analysis.

If I may, I should like to try to illustrate what I see to be this basic dichotomy between the report's findings and the recommendations which are made. For example, I strongly agree with the analysis contained in paragraph 1.2 on pages 11 and 12 of the main reasons for the absence of an adequate level of industrial innovation in Britain. Perhaps I may read them to your Lordships. This is the analysis: constant changes to the economic environment, discouraging longer-term planning; the lack of incentives for managers and entrepreneurs; the increasing burden of legislation; overmanning dictated by trade union pressure; falling industrial profitability; the concentration of British management on short-term returns"— that is a point mentioned by the noble Lord— the lack of adequately trained engineers and designers and an unwillingness of good graduates to enter manufacturing industry; a degree of technological ignorance in board rooms". Your Lordships will recognise almost all of these points as ones which we have discussed in the series of fundamental industrial debates which we have had in this House over the past two years. The series started with the debate which was raised by the noble Lord, Lord Rochester, in February 1977, about the need to increase the esteem in which industry is held in our society. Then there was a debate raised by my noble friend Lord Trenchard, in April 1978, about the need to reform our system of collective bargaining. There was a debate raised last June by the noble Lord, Lord Baker, about the need to increase the intake into industry of more and better trained engineers and to give much more importance to the engineering function. There was a debate last July initiated by the noble Viscount, Lord Amory, about productivity. There was a debate last December raised by the noble Viscount, Lord Rochdale, about the opportunity which industry should offer to attract more of our best young people into industrial employment. Then again, there was a debate raised by my noble friend Lord Trenchard earlier this year on some of the obstacles to growth caused by the long-term by-products of repeated imposed incomes policies.

In all these debates we in this House did, in a fairly fundamental way, go into the diagnosis of issues which I have just read from this report. The working party themselves do not go into them at all, or scarcely at all. All they say—and I was glad to hear the noble Lord, Lord Gregson, criticise this—in paragraph 1.3 on page 12 is this: These problems are essentially for wider consideration within the NEDC and Sector Working Parties". Frankly, this is nonsense. Even if the criticisms which the working party make of the membership of the NEDC, of the sector working parties and of the content of their proceedings were put right, these bodies, by their very nature, are concerned with and biased towards improving the status quo—which is very important—rather than towards creating the conditions for the birth of new businesses.

I say this as someone who does not in any way underrate the importance of NEDC and sector working parties. I believe in their value; I believe that they can make a significant and growing contribution to the smooth and existing working of our existing industrial economy; but to regard them as potential instruments for creating the conditions for technological innovation and for encouraging the birth of new companies, seems to me to be fanciful beyond the bounds of credulity. If we wait on the NEDC machinery for the basic changes identified as being required in paragraph 1.2 of the report, we shall wait forever. These bodies are not and cannot be the engines for innovation. Most of these necessary changes are matters for direct responsibility and initiative by Ministers. Any set of recommendations made to Ministers about what is needed to stimulate innovation should contain proposals, which this report does not do, aimed directly at this diagnosis of what is needed.

A similar gap seems to appear between diagnosis and prescription if one turns to Chapter 4 of the report dealing with the vital role of new companies in promoting economic growth and the development of new industries. At paragraph 4.2 on page 23, one sees a list of the factors which have been found in the United States of America to be particularly favourable to the development of new technology-based firms. Here are some of the factors identified: the availability of private wealth as a source of capital for start up of new ventures; a fiscal framework which encourages flow of private risk capital into new ventures; an attitude in society which encourages entrepreneurship; mobility of individuals between academic institutions and private industry … an active Government expenditure programme in high technology areas willing to provide opportunities for new companies". If that is the diagnosis of what is found to be favourable in another country, where in this report are the recommendations to create those conditions? What does the working party say? In paragraph 4.3 on page 24, which immediately follows that diagnosis, they say as follows: But perhaps the most consistent advice we have had is that the existing tax arrangements do not allow of sufficient reward for successful investment compared with the very real risk of failure attendant on new technological enterprises. This applies both to the innovator himself, and any sources of private wealth which might consider backing him. We regard this as fundamental and of general application…". So do I, my Lords. I believe the working party are absolutely right. But what do they say in the next paragraph? I quote: …we do believe that it is easily feasible to make some relatively small changes to the tax system…". The relatively small changes that are recommended in this report may be marginally helpful; but why not big changes? It is certainly big, major, fundamental changes which are needed in our tax system in other ways if we are going to attack the failings and causes of our lack of innovation, which they analyse on page 11, and bring in the factors favourable to innovation which they found to exist and to be potent, for example, in the United States. Big changes are needed. All I can say is that I hope it will not be many months or weeks before we have a new Government which will make the changes.

The need for such big changes is clearly spelled out by the working party itself in various parts of this report in addition to those which I have already quoted. I will not take up the time of the House by quoting too many of them, but I will quote just one further passage from page 35 of the report, which is this: … the great success of small companies in starting new things of initially modest size, their ability to create new jobs quickly; the ability of the most successful to grow into new sizeable companies; their importance to large companies as suppliers and customers—all this justifies the creation of a business environment that helps them, indeed encourages the formation of many more than are needed, since very many will fail". I could not agree more. But which of these recommendations really meets that need to create that kind of business environment? I repeat that this working party analyses the problem with great clarity and force, but then runs away, in my view, when it comes to making recommendations, from the direction to which its own conclusions point it. If one looks at paragraph 4.12 on page 26 the working party quotes with apparent approval an extract from the Bolton Report on small firms which the noble Lord, Lord Gregson, mentioned. This quotation stresses the great store which the sort of people who start small firms set on economic independence; and I believe they are right. But this simply does not square with the working party's own recommendations, which call for more Government subsidies, more discretionary help from Government Departments, administered discretionally by civil servants and a greater role for various QUANGO-type organisations. It simply does not square with what they themselves say is a characteristic of the sort of people we are talking about; namely, the desire for economic independence.

There is certainly a dichotomy between analysis and prescription here, and it is even further emphasised elsewhere. For example, in paragraph 4.6 the working party point out that: Without a sizeable class of wealthy individual patrons, small businesses in Britain have to rely on institutional finance". Yet in other parts of the report they point out the very real difficulties connected with institutional finance meeting the sort of innovatory development for new technology-based firms on a sufficiently large and adventurous scale. It is in the nature of institutions to find it difficult to do that on a sufficiently large scale.

What then does the report recommend to make the new small technology-based firms less dependent on institutional finance? The answer is precisely nothing. Paragraph 4.9 points out the virtue for new technology-based firms in generating a large number of decision points. I agree; but the recommendations would give extra power and extra money to the existing relatively small number of decision points in Government Departments and in Government-linked organisations—again, contrary in prescription to their own diagnosis.

Paragraph 4.11 points out the need to exempt small firms from as much company legislation as possible, and yet the only suggestion for exemption is from industrial regional policy. I do not disagree with that, but I cannot believe, from the way they conduct their analysis, that the working party really believe that that is the only exemption that is necessary. Why then did they not carry through their analysis and make recommendations on the sort of exemptions which really are required?

At the top of page 34 the report says that inflation is a major enemy of innovation, yet the vital importance of inflation is not even mentioned by the working party in its exhortatory opening paragraphs addressed to the Government at the beginning of their chapter on recommendations. On that same page, page 34, it is also pointed out, rightly, that another enemy of innovation may be local taxation policy and it goes on to indicate what is meant by that. Yet again the recommendations contain no reference to this important matter, let alone any positive suggestions.

It seems to me that another extraordinary gap in the report is the failure to draw attention to the great advantage which Britain could obtain from membership of the European Community. In various places the report points out the great advantage which innovators in the United States have derived over a time from their large domestic market, and on page 28 the working party points out in contrast the limitation which innovators in Britain suffer in comparison because the British market is not more than 3 per cent. to 8 per cent. of the world market for most products of significant technological content. But our domestic market is now potentially the whole European market. It is no longer inferior in size to the American market. Surely in economic and industrial terms, this is what joining the European Community was all about; yet there is no mention in this report of the enormous potential advantage to be gained from this.

In summary, the report analyses accurately and fundamentally the obstacles to industrial innovation in an economy such as ours which at present is characterised by a high wall of taxation, a low level of productivity and in which finance for investment is being increasingly channelled into the hands of Government and into the hands of a relatively small number of institutions. However, having made this analysis which points directly and urgently to the need for radical change, the report's recommendations only tinker with the problems. They attempt to attack the "measle spots", but not the disease itself.

If we are to have in Britain a new burst of industrial innovation we must alter these basic characteristics in our economy. There is no other way; and until some Government in this country realises that and sets about doing it we shall not get the innovation. So my advice to this Government and to the next one is to take very seriously indeed the first-class analysis of the problem contained in the text of this report and to draw the obvious conclusions from it, but to realise that the recommendations do not match that analysis and are totally inadequate. The report will have done great good in bringing together the analysis, if only this Government and the next one will address themselves to the conclusions which flow from it.

3.48 p.m.

The LORD PRIVY SEAL (Lord Peart)

My Lords, may I say that I thought the noble Lord, Lord Carr, made a niggardly speech, nit-picking all the way. He saved himself at the end when he admitted that this was a fine analysis. One cannot expect in a report of this kind to deal with all the ills of our society whether in this country or in Western Europe. I hope that we shall lift up this debate to another dimension. I thought it was a petty approach, and I am rather surprised at the noble Lord. It is not a party matter but he even tried to inject partisanship into this. I think it was a bad approach and that he will regret his speech when he reads it carefully.

I welcome this opportunity to debate this second report from the Advisory Council for Applied Research and Development, both because it enables me to say something about the work of the council, and because of the important part successful innovation must play if we are to have any sort of an industrial future. I am grateful to the noble Lord, Lord Gregson, who takes such an interest in these matters, for arranging for this debate. He has a distinguished record in this field.

The Advisory Council for Applied Research and Development was set up some two years ago, and is now just getting into its stride. Noble Lords will remember its report last year on developments in the micro-electronics field, which received so much attention and which was followed by Government action and programmes covering most of its recommendations. This latest report on industrial innovation continues the series. Work is now under way in the council on a number of important topics, ranging from techniques of jointing and assembly to bioengineering. The social implications of advanced technology are also receiving special attention. As chairman of the council, I have watched over these developments with, I must confess, a degree of fatherly pride, and it gives me pleasure this afternoon to be able to pay public tribute to the work of the council. I am sure that its future endeavours will be up to the high standard of the two reports that it has produced so far.

Much has been written, particularly in recent years, about British industrial performance, and it has been the subject of some of our debates in this House. The noble Lord was quite right when he mentioned the number of debates that we have had over a short period of time, and how this House has played a very important part in discussing and suggesting solutions to many of the ills which beset our own economy here. But I must say this. The report that we are considering today seems to succeed in bringing together many of the arguments in an interesting and novel way, while remaining refreshingly concise. I was pleased to see that the publication of this report has been widely welcomed as contributing authoritatively to the debate, and I expect further stimulating and informed comment this afternoon. Perhaps I might mention that I found one of the annexes especially helpful. This sets out the various ways in which innovation can take place in industry, and the particular factors surrounding each of them. I suspect that others, too, will find this a useful source of reference when we are discussing such matters.

The main message of this ACARD report is simple: that the industrial process does not consist of a number of individual parts among which we can select to concentrate our efforts. Rather it must be looked at as a complete system, each part interacting with the other so that success in one area, however great, can be completely nullified if some other area is neglected. Perhaps I could sum up this approach by the old proverb, "a chain is only as strong as its weakest link". The report deploys the argument that we have been concentrating on the "glamorous" links, such as research and development, and finance, and neglecting more workaday matters, such as detailed design control, material standards and production engineering. Putting aside my council hat and donning that of a member of the Government, I should like to say that we welcome this report and its sound philosophy that—to use its own words, Industrial innovation needs to reflect 'demand pull' rather than only technology push'. It is indeed true that many of the measures taken in the past to encourage innovation have aimed at improving and increasing research and development facilities and effort, but there is now a wider recognition of the need to encourage conditions within which the fruits of research and development can be pulled into the industrial process and exploited in world markets.

The main emphasis in the report, on the need to repair these past defects and for a major shift of resources towards production and manufacturing technology, lies at the very heart of the Government's industrial strategy, and it has been encouraging to have such valuable support for the initiatives which the Government are taking. For instance, some two years ago the Department of Industry Manufacturing Advisory Service was introduced to provide assistance to firms on many aspects of production technology and organisation. It has done a good job, and we want to continue and expand its operations as the advisory council has suggested in this report.

The microelectronics applications programme, now just getting under way, will have an important function in improving methods and processes, as well as in influencing product design. And through the continuing product and process development scheme, together with special programmes such as that to improve foundries, the Government are making help available to upgrade production facilities. Additionally, the extra funds now made available to the Science Research Council will enable it to continue its initiatives in support of engineering services and in fostering closer university/ industry relationships.

As well as identifying some of the weak links, the council has made a series of recommendations aimed at improving the mechanisms of communication, both within Government and in industry, in order to discourage the individual elements from going their own separate ways. These touch on a major area of work of the sector working parties, and the report of the advisory council will be brought to their attention. But the council also commented on some organisational arrangements within the Department of Industry, and I am glad to be able to say that changes of the kind recommended are already in hand within the Department.

I was particularly pleased with the emphasis which the council has placed in this report on small firms, and the contribution they could make. The importance of small firms in the economy has, of course, just been underlined by the interim report of the Wilson Committee, which the Government are now studying with great care. But in the same way that I hope that those of your Lordships with experience in the financial sector will be contributing to our debate today, it is important that there should be a technological input from those with a technological background to the discussion on the Wilson Committee's recommendations. In particular, the advisory council thought that Mr. Kingston's views had much merit, although they did not, I think, significantly influence the Wilson Committee. Mr. Kingston's paper to that committee has, however, been reproduced in full as an annex to the advisory council's report. I shall wait with great interest to hear the views of noble Lords on this matter, since the problem of finance for small firms—particularly risk finance—is a complicated one.

Work is, of course, continuing on developing the Government's policy on small businesses, but, clearly, new technology-based companies have special difficulties which need particular consideration. It is an indication of the interesting way in which the council views the innovation process that it has devoted attention both to the role of small firms and to the influence of the economic environment on their development. These are rightly matters of concern to the council, since the flow of innovative technology through small firms is dependent on the ability of individuals to obtain risk capital and the encouragement they receive to do so.

As part of its consideration of these wider aspects, the council has made some interesting proposals for tax changes. These have been carefully examined, and, in view of related matters soon to be discussed in another place, I am sure that your Lordships will not expect me to expand further this afternoon. Nevertheless, in many areas of company taxation I think I should say that the arrangements in this country are among the most favourable by international standards.

I should like to mention the recommendation that the research associations should play a wider role in supporting their sponsoring industries. I am sure that the associations represent a much under-used asset, particularly by the smaller companies, and ways must be found of allowing them to make a greater contribution, and for their work to become more widely known. Discussions are now being actively pursued with the directors of the associations, and I am hopeful that these will lead to early results. Similarly, the Government have sympathy with the council's view that the trade associations can play a useful part in providing a channel for discussion of the technical and manufacturing aspects of the industrial strategy, and we shall be examining how this proposal can best be followed up.

However, although important, the individual recommendations of the report are not so significant as its overall message: that successful innovation involves the whole industrial process and that no individual element can be neglected. The Government clearly have an important role, in leading the debate, in giving greater encouragement and in creating the general conditions which foster enterprise and innovation. As one way of improving what I might call the psychological climate, the advisory council has suggested that there should be a second Royal award for innovation in manufacturing. This proposal will need further examination. We do not, for example, want to devalue the existing Queen's Award, and I should be very interested to hear the views of the House on this proposal.

May I stress that innovation, the industrial strategy and business organisation are not wholly matters for the Government. Indeed, the part played by Government is perhaps the minor one. The major parts are for companies, engineering institutions, trade associations, the great financial institutions in the City. All these are important, and the council comments on them in its report. I know that many of the noble Lords who wish to speak today have personal experience of many of these matters, and I look forward with interest to what they have to tell me about the advisory council's report. I hope that the report will be accepted and recognised as a document that will stimulate discussion, and that this will result in great benefit to the country.

Viscount TRENCHARD

My Lords, before the noble Lord sits down—

Lord PEART

My Lords, I have sat down. I am sorry.

Viscount TRENCHARD

My Lords, may I ask the noble Lord—

Lord STRABOLGI

My Lords, a maiden speech is to follow.

Viscount TRENCHARD

My Lords, I apologise. I had forgotten the maiden speech.

4.2 p.m.

Lord SCHON

My Lords, though I have been a member of this House for more than three years, I am addressing your Lordships for the first time. I crave indulgence and thank your Lordships in advance for your understanding of my inexperience. I should like to add my thanks to those which have already been expressed to the noble Lord, Lord Gregson, for initiating a debate on a subject which is of particular interest to me.

Your Lordships will be aware, from the few words I have spoken, that I was not born in this country. I was born in Vienna. When I was 19 years old, I got a job with a Central European chemical company which worked with a German concern—the first to develop synthetic detergents. I was based in Prague, then in Vienna, and then back again in Prague in 1937, from where I was lucky to be able to escape with my wife after Hitler marched in on 15th March. I arrived in the United Kingdom on 28th March 1939, exactly 40 years ago today.

Several noble Lords

Hear, hear!

Lord SCHON

My Lords, I owe a lot to this country which offered hospitality to us at the time when we needed it. With me, I brought knowledge of the earliest synthetic detergents. I became co-founder of a small company, starting in a most humble way. At the end of 1940, after having been bombed in London, we moved to Whitehaven, in Cumberland—a development area. As the leader of the team which we gradually assembled, I was able to make my contribution to building up one of the largest units in the world making synthetic detergent raw materials, and ultimately employing 2,300 people. This was an innovatory effort, and I learned much in practical terms about the subject we are discussing today and about the capabilities we have in this country.

In 1967, I became a member of the board of the National Research Development Corporation, and on 1st March 1969 I was appointed its chairman, a position which I held for exactly 10 years. I retired four weeks ago. My association with the National Research Development Corporation provided a window seat on British innovatory capacity, and I believe that British innovatory capability is competitive, in absolute and relative terms, with that available in any other country.

In terms of exploitation, I agree with the views which have been expressed in the ACARD report. Broadly speaking, I am ready to accept the general conclusions of this report. I have, however, to qualify this by saying that I find it difficult to accept without comment some of the references made to the NRDC, and I would possibly lay more emphasis on some points than on others.

The NRDC is a public corporation which was set up by Parliament 30 years ago in order to promote the development and exploitation of British inventions. Today it has two main activities: first, the licensing of inventions derived from United Kingdom public sector sources—for example, universities, research councils and Government establishments—and, secondly, the provision of finance for innovation by industrial companies. As its former chairman, let me say that the NRDC is now self-financing. It gives value for money. Earnings have risen in the last three years to about £10 million per annum before tax. The NRDC pays £5 million in tax. The corporation is now involved in 440 projects, which in themselves provide employent and create an annual business with a value of some £100 million in new products for sale at home and abroad. The NRDC owns and administers some 1,500 exploitable patents. It provides finance for work done in the public and private sector, split at the moment about 50:50. The professional skills available in the NRDC—for example, in terms of capability to protect intellectual property in the form of patents—are second to none.

Another point which is of particular importance to people who want to discuss their inventions is the unchallenged integrity of the officers of the corporation. In its 30-year history, more than 37,000 approaches have been made to the corporation by inventors, who necessarily have to disclose the substance of their inventions. There is not one case known of any indiscretion being committed. Accepting that imitation is the sincerest form of flattery, may I add that there are now about 30 NRDC-like bodies in other parts of the world which have followed the British example. May I mention, incidentally, that the NRDC is keen to hear about new, worthwhile projects and that it has the funds to support them.

Having said all this, I cannot let the opportunity pass without paying tribute not only to my executive colleagues and to my colleagues generally but in particular to the efforts and the contribution made to the development of the NRDC by my noble friend Lord Halsbury, who was its first managing director, and also by my noble friend Lord Black, who was my precedessor in the chair.

I said that I agree with the recommendations of the ACARD report, but I hope that your Lordships will not consider me to be controversial when I say that I am unable to accept the suggestion that the NRDC should obtain ministerial approval before licensing abroad. I can assure your Lordships that the executives concerned in the NRDC have industrial backgrounds and are fully aware that, from the point of view of United Kingdom employment and balance of payments, it is much better to produce a product here for the home and export markets than it is to sell a licence abroad. Only after all efforts have failed in trying to exploit at home, or when it becomes apparent that it is essential to exploit by production abroad, does the NRDC consider an overseas licence.

May I now support a specific point which emerges from the ACARD report in regard to relations between university and industry. From my own experience, I have found that some of the most successful innovatory efforts in industry are the result of the ideas and work of academics in their twenties. I am fully aware that the contact between university and industry has been improved in recent years. Great credit goes to the Science Research Council, which is doing its best to support this development. Infinitely more integration of research work at universities and in industry would be to our advantage. I should like to see greater involvement by industry in financial terms—for example, sponsorship by industry of research projects undertaken at universities for industry.

Industry's involvement in university research also gives added assurance that the market place is not lost sight of. We can learn from what others have found in practice. For example, in America—and I have studied this with great care—a very substantial share of the research work at universities is sponsored and funded by industry. Moreover, the involvement of industry would also ensure that the publication of university research work would be handled with care. Personally, I should prefer to see university research workers receiving financial rewards rather than having to get their satisfaction from seeing their names in print, often before efforts have been made to protect the intellectual property they have created.

I should now like to make some general observations. Over the years Britain's investment in new technology has fallen behind that of our industrial rivals. At its best, British technology cannot be beaten. New technologies applied by our competitors represent a threat to our jobs. The only way to overcome this threat is by the introduction of new and better technologies in existing industries and by the creation of new industries based on new technologies.

We have to increase our productivity; we have to create more wealth. Moreover, we have to find employment for more people at a particularly difficult time when microprocessors and robots are being developed. We have to sell more, particularly abroad. Since the end of the last war our share of the world market has gone down from—I have the figure here of 11.4 per cent., which is less than that mentioned by the noble Lord, Lord Gregson, to less than 5 per cent. These are statistics and I am fully aware that statistics are often the shortest distance between an unwarranted assumption and a foregone conclusion, but the tendency is quite clear. We have dropped in the share of the world market we are holding.

In setting our targets to produce and sell more we must always bear in mind—as I was taught when I was a very young man—that the perceptive buyer looks for quality, price and service. I have referred to the criterion of quality in speaking about the introduction of new technologies. Price depends on many factors, such as productivity and volume of sales. So far as service is concerned, very important issues are continuity and regularity of supplies. All this makes it obvious that we should approach our task as an industrial team and meet the challenges of our competitors instead of challenging each other as we do so often.

To conclude, I do not think that you, my Lords, who have been born here can be conscious of the immense sense of pride that I, who came from the Continent, with few friends and no resources, feel on this occasion. The debt that I owe to the kindness and humanity of the British people cannot be discharged.

4.13 p.m.

Lord SHACKLETON

My Lords, it is a very great pleasure to me to follow my noble friend—and he is an old friend—Lord Schon. It may not always be appreciated in this country that some of the most devoted British citizens are those who came from abroad and have found their home here, as Lord Schon has done. On the numerous occasions when I have met him his theme has always been the same—a militantly pro-British theme. I think he was correct when he told me that at the outbreak of war, when he and his wife were interned as enemy aliens—probably in the Isle of Man—on the very first night they found themselves in a boarding house, and the thing that stuck in his memory most was that the landlady came and asked his wife what she wanted for breakfast the following day. Tolerance and ease in a situation like that I think reflects something of the British. However, we very much appreciate that Lord Schon, who has done so much for our country, should now be a Member of our House.

It is not inappropriate that the noble Lord the Lord Privy Seal has spoken in this debate, because both noble Lords have strong links with Cumberland. The noble Lord, Lord Schon, has built up his own business there, he has given a great amount of employment, and has recently served with enormous distinction as chairman of the National Research Development Corporation. We appreciate his words of wisdom, and on future occasions, when he may feel freer to give us advice even more frankly than he has done today, he will be very welcome to do so. It is appropriate also that he referred to the noble Earl, Lord Halsbury, because he was, if not the first, one of the early chairmen of the National Research Development Corporation. It is typical that in your Lordships' House we have people like Lord Schon and Lord Halsbury. If I remember correctly, the noble Earl, Lord Halsbury, was the research director of Decca, responsible for the long-playing record and he knows quite a bit about innovation. Again the noble Lord, Lord Gregson, is well known in the engineering profession and it is appropriate that he should introduce this debate.

In the face of this, I feel singularly unqualified to speak today, except that I have spent quite a lot of time in industry and now as president of the Parliamentary and Scientific Committee I have been directly concerned in many of these issues. The importance of innovation is not something which has just been discovered, and nobody is suggesting that it is. I remember distinguished people like Dr. Carter of Lancaster University writing with distinction on the subject, and now we have the benefit of the Spinks Report.

I now wish to address some remarks to the noble Lord, Lord Carr of Hadley. It is too much to expect anything very original from a report written in a good deal of hurry on this subject by a working party reporting to a council and finding as quickly as it can a description of the problems. If I have a criticism of the report it is that, although I am all for modesty, this report is too modest. We do not even know who the authors were. How many people realise that, in addition to my noble friend the Lord Privy Seal, who at least is not anonymous, others concerned are people like Sir James Menter, the deputy chairman; Dr. Spinks, who was the chairman of the working party and the research director of ICI. My first word of advice to the Lord Privy Seal is that when these reports are published they should be put out in a form that will not deceive the noble Lord, Lord Carr, because Lord Carr has treated this like a regular government report which is going to have detailed recommendations summarising it at the end, whereas the message could not be clearer. He read out the message but he complained that certain recommendations dealing with one particular point did not cover all the words of wisdom contained in the earlier part of the report. I have enormous respect for the noble Lord, Lord Carr—is he restless? No, I do not think so.

Lord CARR of HADLEY

Not too restless, I hope, my Lords. I rather agree with what the noble Lord has said about the presentation of this report. It begins with a chapter which claims to summarise its recommendations and I said, both at the beginning and at the end, and several times in the middle of my remarks, that I thought it was a first class analysis. But I think it would have been better if it had not been produced in such a hurry but was left at the analysis, or that the recommendations had not been gathered together in a separate chapter which gave the feeling that they were the distillation of wisdom, which they were not.

Lord SHACKLETON

My Lords, I think that is a fair criticism. Nevertheless, the message could not be clearer than in fact it is. Of course, it was a report to a council which was reporting to the Government, and they were probably aware of some of the sensitivities of the Government in the matter of taxation. I think it is a pity that the noble Lord, Lord Carr, was as party political as he was, because I intend to make a number of remarks which may not be entirely acceptable to some of my noble friends on this side of the House but I am not intending to do so as a contribution to Conservative propaganda at the next election. One thing which we have in this House is the ability to discuss these matters pretty freely. Having said that, I fully acknowledge that the noble Lord, Lord Carr, contributes a great deal but I think he was a little unfair to the report.

It is discouraging when a Government try to practise a little open government and actually publish some of their working papers for which everybody is shouting, and they then get ticked off because the form is not suitable. I congratulate Dr. Spinks and the members of this committee on an interesting report. On the other hand, it does need quite a lot of reading to get the real flavour. I suspect the skill of a civil servant somewhere in putting it in a form not too unacceptable to Ministers, and this may be part of the explanation. What I am saying is that a little cosmetic work would have helped.

Lord ORR-EWING

My Lords, I wonder if the noble Lord would be kind enough to tell us who were the subscribers to the report. I did ask the Library this, but the answer came back that they wished to remain anonymous. The noble Lord has mentioned some very distinguished names, and, like him, I should like to know who were the contributors.

Lord SHACKLETON

So should I, my Lords. I tried a little research too, without much success. The Library did find out for me who were the original members of ACARD, and having just run into Sir James Menter I was able to confirm that he is still deputy-chairman. I do think it would be perfectly valid to name the contributors to a report of this kind from a number of distinguished people, and we should at least like to know whether the members of the council are still the same as they were when it was set up in 1976.

Much of the report is concerned with comparison with the United States, following a study—and inevitably we are back with these ghastly acronyms—of NTBFs, which stands for New Technology Based Firms, and not total bloody fools, as I thought. What is really rather strange is that, despite the advantages of having NTBFs in profusion in the United States, at least during the decade 1966–76 the industrial performance of the United States was not all that good. The interesting thing is that this year and last year it has been running at a rate double what it was during the previous decade, and a good deal better than Western Europe. This rather suggests that in the long run Governments are important and macro-economic conditions still determine a great deal. But nonetheless there are still obstacles in this country, and the report sets this out very clearly, even if its authors were too frightened or too wise to make specific recommendations on some matters.

I know that this Government has done a great deal in trying to stimulate industry and there is much they can be proud of, but there are certain weaknesses. I repeat what I believe the noble Lord, Lord Carr, said—that, without a sizeable class of wealthy individual patrons, small businesses in Britain have to rely on institutional finance. While acknowledging what the NRDC has done and what other bodies have done, the fact is—and this is something that we in the Labour Party have really got to face up to—that, as I am quite sure the leading figures in the present Government are aware, taxation of the individual is too high. I am not talking about company taxation; that is perfectly all right; nobody likes it, but it is as reasonably good as in any country. We have a fundamental dilemma here. By and large, there can be no accumulation of private wealth, especially by some of the means used to amass those enormous accumulations made during the property boom—dare I say? under a Conservative Government; perhaps I should not because that is too party political. But the fact remains that an individual is able and more willing to take risks than any institution.

Let me refer to the other ACARD report on the application of semi-conductor technology. There, written for all to see, is the following: A feature of acvances in the application of semi-conductors, particularly in the United States, has been that they have depended on innovative entrepreneurial activity, mostly by individuals. If the United Kingdom is to respond effectively to the opportunities, it will be necessary to create appropriate economic and social conditions to encourage such innovative activity". This is where, again, they become a bit discreet: The actions needed to bring this about involve social and political questions outside the competence of ACARD". This is were again they slightly burke the question. We understand why. The truth of the matter is that Silicon Valley has been largely financed.… The noble Lord, Lord Soames, looks unhappy.

Lord SOAMES

My Lords, I was just saying that it is a great pity to burke the question.

Lord SHACKLETON

I see. The noble Lord was nodding.

Lord SOAMES

The Japanese do that, too.

Lord SHACKLETON

My Lords, the noble Lord, as a former European Commissioner, is well qualified. The truth of the matter is that Silicon Valley has been to a large extent financed by individuals who have either financed themselves or their friends, and I know people who are able to raise this money. When it comes to innovation one really wants to look at how it works. It is not just the inventor. It may not even be the production man. There is the market entrepreneur. But they are people who will take a risk. The proportion of failure is very high indeed, and this makes it more difficult even for a body like the NRDC. The noble Earl, Lord Halsbury, will remember hydrofoil boats and other activities which for one reason or another they turned down. Although capital gains tax at 30 per cent. is by no means unreasonable, there is no doubt that marginal rates of taxation do prevent the accumulation of private wealth, and to some extent this is our dilemma in the party. We believe in a mixed economy, but to some extent we are reluctant to allow those essential requirements to work in the capitalist part of the economy. Somehow we need to face this, and I believe the Government do understand that.

I would draw your Lordships' attention to a report in the United States written by Albert Shapero from the Wharton Business School. I am a bit doubtful as to whether MBAs really do contribute all that amount to innovation, because they are so busy creating their models, and this is to a large extent an instinctive thing. But they did carry out an interesting study and were able to point out that a number of United States corporations in 1970 decided that they were going to foster entrepreneurial activities, to go into what was called venture management outside ordinary corporate control, other than perhaps a financial control, and that a high proportion of these have failed. We have this dilemma here. Therefore, I think the individual entrepreneur, whether we like it or not, is important, and he needs the money. Interesting though the proposal is that merchant banks might put up money and do a little testing on this, I do doubt, admirable though merchant banks are, whether they are really competent to take this sort of decision. This is something we will need to think carefully about.

Too many corporate institutions are essentially conservative, and I am not being political in saying that. They will always try to cut their cloth and to organise their affairs to fit in with corporate philosophy, and sometimes to stop developments because they do not fit. This is not to say that we should not encourage big companies to engage in this sort of venture activity. I know some where they have small companies really allowed to run on their own, to be judged by their profits, conforming broadly to the social philosophy of the company in regard to standards of integrity and so on, but having an opportunity to share in the profits, even to the extent that the managing director of a small company may be making more money than the chairman of the main board. That is to be found in a number of areas.

I wish to leave those thoughts with the Government because I believe that the Government—I hope a Labour Government, but if not it will certainly be a Conservative Government—should make a greater amount of money available for individual entrepreneurial activities. I hope that that will not be quoted in any election literature!

I should like to comment on one or two other matters. I agree with the noble Lord, Lord Carr of Hadley, that it is rather surprising that there is absolutely no reference—so far as I can see—to Europe and the industrial strategy. Yet there is the distinguished man Davignon hard at work, and who incidentally gave a very good talk at Chatham House the other day. The truth is that we are not European, despite the efforts of the noble Lord, Lord Soames. I was a supporter of entry into Europe—not on industrial grounds but on political grounds. None the less, we hope that we shall see it and that those who run the European economy will evolve a philosophy that is meaningful to the people of this country.

There is one other matter that I should have liked to have discussed and that is the situation in Japan. Japan, again is a very different place. The noble Lord, Lord Peart, and I, in our quiet way, made an expert study of Japan many years ago. We know that Japanese culture and society is very different from ours and that their community approach, their guarantee of continued employment and their paternalistic loyalty are things which we cannot expect to achieve in our freer-minded society. None the less, I commend for the Government's consideration the report on Japan of the Select Committee on Science and Technology in another place. It is all the more alarming for me to hear—I know that this is not for us to say—that there are proposals in another place to abolish the Select Committee on Science and Technology, which was largely set up on the initiative (as was the National Research and Development Corporation) of the original Parliamentary and Scientific Committee.

The reason I mention that matter with great nervousness—not that another place ever shrinks from criticising us—is that if it were to do so then, in view of the wealth of ability which we have and the quality of the reports that are coming now from our European Committee, I hope that the noble Lord the Leader of the House will give consideration to the setting up of a Select Committee in this House. After all, we have the ability here. One only has to look at the excellent reports from the subcommittees of the noble Lord, Lord Sherfield, and the noble Lord, Lord Ashby, to see what can be done.

That leads me to make a passing reference to the latest Government report entitled, Review of the Framework for Government Research and Development. We may not get time to debate it here, but it is open to consideration and it is the sort of matter that might well be dealt with by a committee in your Lordships' House.

We are having an interesting debate and I hope that ACARD will be encouraged to continue its work. It may be that it might wish to spell out, in words that the noble Lord, Lord Carr, can understand, what it is perhaps too frightened to say directly. However, it is a valuable report, but it takes a great deal of reading. Meanwhile, much depends on the Government's attitude and their appreciation of the role of management. At the moment, there is a malaise in management. I happened to preside at a lunch where the Prince of Wales delivered a very good speech. Unfortunately, there were one or two sections of it, which the Press leapt upon, about British managers not being good enough. He was accused of Left-Wing views, whereas others said he was merely representing the views of the City about industrial management. None the less, I believe that the Government's attitude, and the points which my noble friend Lord Gregson made with regard to the increasing status of engineers and technologists, is fundamental, and I hope that that will be part of a continuing policy of whatever Government there is in this country.

4.35 p.m.

Lord RUGBY

My Lords, I should like to express my thanks for the privilege of addressing your Lordships' House for the first time. It would have been difficult for me to let pass the opportunity of taking part in this debate as I already have a personal involvement with innovation, albeit part-time, and all that it involves; namely, patenting, demonstrating and marketing on my own account. It is a very far cry from the position of the noble Lord, Lord Schon, at the head of NRDC to my rather low-ranking position, which one might say provides the worm's eye view.

At the outset, therefore, I must declare an inescapable interest as I am but one among a galaxy of lone individuals who apply what skills they possess and put their mind towards either improving or designing generically new products where the need exists, within the scope of their own trade. As inventors we accept, and even embrace, the compulsive challenge of a problem and, by the process of the slow drip, drip of applied thinking over long periods, achieve answers of a mechanical nature to problems of long intractability—and that is not an uncommon attribute.

The booklet by ACARD, among its other deliberations, has touched on the problems faced by individual inventors and sadly offers little comfort to them. It is, I believe, a fact, and a tragic one, that less than a quarter of 1 per cent. of inventions ever reach commercial success. The great majority are allowed to wither away or are cannibalised by astute plagiarists here and abroad. It is indeed of national importance that this tremendous wastage of free talent should receive such scant recognition. ACARD has set the ball rolling with its booklet. I hope that high level action will result from it. The evidence submitted to the Wilson Committee by Mr. William Kingston, was, in my view, of enormous impact and importance.

As a start, may I therefore, crave the indulgence of your Lordships' House in setting out a basic sequence of invention. Already the old adage has been quoted today—namely, "necessity is the mother of invention"—and necessity is the prime mover towards concentrating the mind on the analysis of a problem, towards improvisation and testing ideas or, in other words, towards doing the basic research. Success is likely to be elusive, but when it comes—if it comes—it is indeed the very simplicity of the solution which provides endeavour with its truest reward. Simple solutions can, however, be misleading and frequently get tagged with the comment, "Any fool could have thought of that", or "How come it was never thought of before?".

Successful research leads to the next stage—development. That means prototype construction, testing under all conceivable conditions, incurring patenting costs, carrying out demonstration under the eyes of professional judges and also of commercial institutions, and testing the purchasing end of the market—the ultimate users. At that point, the entire cost is carried on the back of one person. It is only at that stage that some kind of commercial cash evaluation can be attributed to an invention, and that evaluation must be based on the proven facts up to date, coupled with a decision to manufacture and to sell. The product has, as yet, no track record other than those assessments and, therefore, market research contains a high element of faith rather than facts which have yet to be established.

This booklet refers to track records and market research as being the criteria for success. I believe that this is the stumbling block, because the individual, lone inventor is isolated from these commercial capabilities. Consequently, if the success of an invention which has achieved acclaim on its own merits now becomes dependent for ultimate success on the attitudes of market researchers and commercial criticism, that is tantamount to saying that one has scored one's century but unless one can prove oneself a wicket-keeper and a bowler as well and have a relationship with the selection committee, one will get no further.

Having discussed and learned from the experiences of specific inventors who reached the pinnacles of success, one learns that invention was only a part of the total struggle. The breaking into and the establishing of the market was the last enemy, and a formidable one. It is as well to recognise at the outset that the reaction of companies towards inventions which have an impact on their own markets is quite simple, They do not like them. Such inventions tend to distract them, to disturb them and to create problems for them. Companies say to themselves, "If we ignore this invention, it could be to our disadvantage if one of our competitors takes it up"; or, "If we do take it up, what happens to our other production lines? Would we be left with unsold stock on ourhands?"; or "What will be the reaction of our own established research engineering and marketing departments if we go over their heads and take in an outside product?" That is known as the "NIH syndrome", meaning "Not invented here".

There is no doubt that managements of the larger companies tread warily. They are motivated by numerous pressures. Too often they resort to gambits; such as obtaining exclusive licences on inventions with the sole intention of a delaying and a holding operation and with the ultimate extinction of that specific threat in mind. Therefore, the young seedlings of invention which in truth formed the origins of these very companies today find no place to take root other than these preservations, these entangled pastures. Invention, private enterprise—call it what you will—needs to flourish in a climate of inspiration, encouragement and enthusiasm, and that should come most especially from those who control the economic destiny of this country.

4.42 p.m.

The Earl of SHANNON

My Lords, I know noble Lords will agree that this afternoon we have listened to two quite exceptional maiden speeches. I know that I speak for the whole House when I congratulate the noble Lord, Lord Rugby, on giving us the benefit of his personal knowledge and involvement in innovation. Although slightly belatedly, I should also like to thank the noble Lord, Lord Schon, for giving us of his unrivalled knowledge. I would merely say that it has been our loss that he has chosen to keep a three-year silence. I hope that both noble Lords will now give us of their knowledge at regular intervals. Like other noble Lords, I should like to express my gratitude to the noble Lord, Lord Gregson, and, in this instance, to Dr. Spinks, the chairman of the sub-committee which prepared this report. In addition, I certainly do not forget the noble Lord the Leader of the House who is chairman of ACARD and the other reputedly anonymous members of ACARD—I have a feeling that somewhere in my office I have their names on a file, which, of course, I have forgotten to bring with me.

For many years your Lordships' House has been an excellent forum for debating the related subjects of research, development, pilot production—in fact, the whole spectrum of the innovation process. Some recent notable occasions come immediately to mind, apart from those already mentioned by the noble Lord, Lord Carr of Hadley. I have in mind the Green Paper of Mr. Wedgwood Benn which was an attempt to form the British Research Development Corporation, which was to make Government laboratories wholly commercial. With the loss of that General Election, that got no further. Then we had the White Paper, Framework for Government Research and Development, which is now more generally known as the Rothschild Report. However, today we are debating this new ACARD Report on innovation in industry, which I submit is meaty, accurate and wholly appropriate at this time. The real fault I find with it is that it was not prepared and acted upon by Governments about 30 years ago. Had that been so, I do not think we would be in the industrial mess we are in today.

It is not only a British lament that national inventiveness is seldom carried through to full commercial exploitation. In my position with the research associations in this country and as secretary of a similar body in Europe, I hear similar wailing and gnashing of teeth by my opposite numbers among our European neighbours. However, in spite of that, I believe that we must be at the head of the "lack of exploitation" league, if only because of our quite exceptionally large traditional national innovative capability. As a nation we never did compete on level terms with other, often larger, nations. When we tried to do so, we usually lost, but we continually found a way round that with new technology, which left us with an advantage and in a winning position.

All that leads me to the one outstanding recommendation of this report—which has been referred to by every other speaker—regarding the lack of incentive today. Do noble Lords honestly believe that Sir Francis Drake, Sir Walter Raleigh or Sir Richard Grenville would have wreaked the ruin that they did on the treasure fleets of Imperial Spain just for the fun of it? No. It was because their gracious Sovereign gave them something from their successes for themselves and their men. What is more, they were free from being clobbered on arrival with income tax, import duties, surtax, VAT, national insurance surcharges on their crews, capital gains tax and probably a long battle with the local inspector of taxes over allowances for depreciation and damage suffered by their ships in the action. If that is the sort of ridiculous attitude which has been adopted by successive, and, I respectfully suggest, not very clever Governments over the last 40-odd years, how then can they wonder why the entrepreneurial implementer of innovation and new technology is no longer prepared to stick his neck out, work hard, create employment and risk his little all when, if successful, the benefits will be grabbed by a greedy State in order to finance its political programmes of teaching the electorate not to earn its living but to vote for it instead?

At this point I should like to support the noble Lord, Lord Shackleton, who is president of the Parliamentary and Scientific Committee. As a past vice-president and present deputy chairman of that body, I would recommend your Lordships to bear strongly in mind that, should there be no Select Committee on Science and Technology in the House of Commons, your Lordships should think of forming one here.

I have referred to the obvious outstanding recommendation regarding fiscal change contained in the report which, if implemented, will do more good for the national economy of this country than all the Cabinet meetings held in the last 15 years. I would remind noble Lords that to do full justice to this report would require a speech of not less than two hours; so, perforce, I shall have to confine myself to only two areas where I have personal knowledge, and leave the others to abler tongues than mine. First, I should like to draw your Lordships' attention to Recommendation 2(iii) regarding the expansion of the Department of Industry's manufacturing advisory service. As your Lordships may or may not know, this is a scheme where selected small and medium-sized companies from industrial priority sectors—as well as a few volunteers who have answered through the publicity given to the scheme—receive the offer of a visit from a recently retired and usually well known industrialist in that sector. Such an advisory visit usually leads to a take-up of the 15 man-days of free consultancy provided by the service. Then, if they wish, to a further 15 man-days where the company pays half the cost of the consultancy itself. Finally, many companies continue the consultancy wholly at their own expense. I would remind your Lordships that in many cases this is in respect of companies who have never sought outside help in any way at all.

The scheme was originally planned on a programme of five years, of which the second year finishes this coming July. The programme provided for 640 firms to be visited in the first two years, and that target is being met. Then, in the third year, this target was to be raised to 700 firms a year, hoping to rise to 1,000 firms a year in years four and five. Among the volunteers there was of course almost 100 per cent. take-up of the services offered. However, of those companies who were selected 80 per cent. agreed to a first visit. Of that 80 per cent., 80 per cent. agreed to the free 15 days' consultancy. That means that of those approached initially 64 per cent. accepted the consultancy. Of that 64 per cent. half continued by themselves paying in the next stage half the cost of the consultancy and, as I said before, many of these companies had never sought outside help to their business. It was a foreign thought to them, but they are now fully convinced.

In fact, a sample survey from 30 firms early on gave the following figures, which I believe will be representative of the bulk of the number of firms visited during the scheme: 93 per cent. declared themselves satisfied; 77 per cent. went so far as to say that they were well satisfied; and of the recommendations made by the consultants to these firms over 75 per cent. were implemented, all at the cost of the firms themselves. It is calculated that the cost benefit over three years, based on the total cost of the scheme to the Exchequer, will he of a benefit ratio in the terms of 14 to 1. This, I think your Lordships will agree, is a valuable scheme in assisting our national economy, although I say it as a very humble member of the steering committee of that scheme.

I hope that the Government will agree to expand what is a proved success. I hope in this respect that we may receive the assurance of the Conservative spokesman that, should they win the possible Election, they will not unthinkingly destroy this manufacturing advisory scheme as they did previously the similar production engineering advisory scheme. I hope that they now have fully prepared policies in this field. The last time I suspect that they had very little policy, and perhaps this was because they were surprised themselves that they won that Election. Instead, at that time they substituted the smug, sanctimonious noises about lame ducks, and, in a frenzy of capitalist puritanism, cancelled anything to do with a subsidised service.

There is nothing wrong in the present circumstances in using public money to assist industry on a co-operative basis. What is wrong is to rely on the advice of some whizz kids from a large multinational company and then tell small industry to stand on its own feet when, for years, Governments have been removing the very financial legs on which they now expect these industries to stand.

Now, may I come to Recommendation 2(iv), which recommends the provision of support to research associations and engineering institutions to study, reasearch, and publicise sciences towards efficient, internationally competitive manufacture. The entry fee today—in fact even a capability in new technology—is often very large and beyond the resources of anything except those of the largest organisations. An intelligent Government programme, initiative, and participation, especially in purchasing, often produces spin-off of great value to industry. Of course we all know of the classic example of the United States Government when they made their decision to place a man on the moon. It produced either spin-off or slop-over, as you prefer to call it, of immense value to their industry, especially in the microelectronics field, which is now even threatening us with a new industrial revolution.

Recommendation 5 calls upon the Government to encourage the research associations to play a wider role in their industries, particularly in the subsections to provide information services and machinery evaluation services on equipment available both at home and abroad. Next, to provide research and technical support for small firms at prices those firms can afford. Also to develop their roll one might call it, as a stepping-stone, to be used by highly qualified academics to enter industry. All this the research associations already do, to a greater or lesser extent depending on their resources.

However, spurred on by the numerous references to the research associations in this report, those in membership of the committee of directors of research associations met to consider this report and to prepare a programme of intensification and enlargement of their activities in line with the recommendations. In this respect they suggest that the programme should include: make desk surveys of available new technology; visit manufacturers and users at home and abroad to gain technical or economic information on new technology; make techno-economic studies of new and emerging technology; evaluate in laboratory and in factory these new technologies; carry out demonstration projects for equipment and installations; provide information services to disseminate the information gained; also provide training services and hands-on training centres for technology transfer mainly to management and supervisors.

The research associations, as your Lordships well know, were originally formed to support small firms, and in this particular field they envisage an enlargement of their present activities under four main categories: to provide selective dissemination of information services; prepare raw material, product and equipment directories; also prepare forecasts of trade and market trends by area; to carry out inter-firm comparisons; to conduct Which? type evaluations of plant, equipment and materials; to provide information "desks" manned to meet the information needs of small firms; as well as providing "small firms information services" which are to be evolved over a period as a result of experience with this scheme, but initially to be carefully designed, tested, and refined.

In the field of consultancy, they should provide limited consultancy services and trouble-shooting covering all aspects, from marketing through production to distribution; they should carry out in-plant technical audits and waste reduction exercises; they should conduct testing and evaluation of suitability for purpose of equipment because suppliers often do not regularly visit small firms; and they should advise on factory planning. On training, they should organise short courses and discussion groups set up locally, especially for small firms, and provide hands-on training courses at which small firms' owners, and staff if required, could gain experience actually by operating the latest equipment useful for small firms. With regard to the membership of research associations, it is hoped to be able to define some form of membership package suitable for small firms and to encourage them to participate in the work of their research associations.

I come to Recommendation 12, which refers to increasing our low proportion of qualified personnel in industry compared with other successful developed countries. There has always been a sometimes inconvenient but nevertheless acceptable drain on research association staffs, who are enticed into member companies. However, to organise and regularise such a flow, the following activities are suggested: to provide full-time tutors in the research associations to liaise with universities and look after trainees; to institute higher degree work in research associations; and to organise a scheme to support entrants to work alongside experienced research association staff on projects and consultancies in the laboratory and especially on in-factory jobs. But this type of work, unlike that previously mentioned, would not necessarily normally lead to higher degrees.

The research associations could also develop a university computer placement council, rather like the present UCCA scheme which places school-leavers in the university. In such a context, research associations would be particularly well placed to develop, in co-operation with universities, a scheme whereby employers could notify their research association of vacancies for graduates and the association would computer process the information on a fee basis. That information would be made available to the universities on terminals to help undergraduates match their skills with the available industrial jobs notified.

Recommendations 8 and 9, dealing with the involvement of the research associations with the sector working parties and the research requirement boards in assessing technical strategies for sectors of industry, have the fullest support of the research associations, who are ready to play their part in making what they believe to be a significant contribution through their unique position in the industries which they serve.

Recommendation 11—strengthening relationships with universities and industry—is closely akin to the research associations' suggestions which I have already made on Recommendation 5(iii), and the research associations would appreciate being consulted further on any part they might play in further assisting such relationships.

Time does not permit me to observe other sections of the report. I would only observe, in conclusion, that the report has great merit and deserves to be heeded and acted upon by Government of whatever political colour. Whoever may emerge victors at the next Election, it should be a salutary thought for them to reflect that British industry is far more important to the country than British government. They should do all they can to encourage innovation and the adoption of new technology in British industry, because history has shown us that we have survived and can survive only by the intelligent use of our wits rather than by sheer manpower—which, compared with the low wage developing countries, we do not have—or the temporary fortunate relief currently enjoyed by the possession of scarce natural resources.

5.5 P.m.

Lord WILSON of HIGH WRAY

My Lords, I join with others in congratulating the noble Lords, Lord Schon and Lord Rugby, on their maiden speeches, which were extremely good and interesting, as were all the speeches we have heard today. I finished writing the speech I was proposing to make to your Lordships' House at 11 o'clock last night, and it might have taken me 20 minutes to deliver. Noble Lords will be extremely pleased to hear that virtually everything I was going to say has been said and will be recorded in Hansard, and therefore I need not say it.

I agree with others that this is an excellent report and that, if only it could be implemented, it would be a fine thing for industry. I was particularly interested in the stress laid on the importance of the small firm. Until six months ago I was the chairman of a small, rather specialised, engineering firm in the North-West of England which was started in 1853, was bought by my great uncle in 1881 and has been managed by various members of the family ever since. The only reason it has kept its head above water has been because we have spent a lot of money on research and development. We were fortunate in that when my first cousin joined the firm immediately after the 1914–18 war—he was an extremely good engineer who had passed out from McGill University in his first year—he started off by inventing a new water turbine which enabled us to compete with the very strong German competition overseas between the wars. He went on to develop a new type of pump, but that took a great deal of getting off the ground; it was years before we really got it off the ground, until we found during the last war that it was an ideal marine engine cooling water pump, and we are now selling large numbers to Caterpillar in the United States, to Cummings and other American builders. I assure noble Lords that selling engine components in the United States is harder than selling pork in Jerusalem.

We were founder members of the British Hydraulics Research Association and have always kept our association with it. We use the Production Engineering Research Association and we have never had a penny assistance from the Government; we have had to paddle our own canoe the whole time. We are reasonably profitable. We do not make a lot of money but I believe we have one of the best engineering workshops in the North-West of England and we try to keep abreast of the times. I will not take up the time of noble Lords any further or continue to blow the trumpet of the firm with which I have been associated for some 45 years.

5.9 p.m.

Lord KINGS NORTON

My Lords, I wish to add my thanks to those which the noble Lord, Lord Gregson, has already received for so effectively introducing this debate and for giving us such a good idea of the merits of the ACARD paper. It was a great pleasure to hear the noble Lord the Leader of the House at an early stage of the debate and, while I should love him to tell us in his remarks at the end of the debate how many of these recommendations the Government are prepared to accept, I shall not expect too much of him. However, I was extremely glad to have his assurance that the Government will consider the report very carefully and I hope that, should there by any chance be a new Government, they will be equally receptive.

I should like to add my congratulations to those already extended to the maiden speakers. The noble Lord, Lord Schon, is an old friend of mine. I knew him in his role as chairman of the NRDC and I knew him in his pioneering role in the chemical industry in the North of England. We have been waiting three years for his maiden speech and I hope that we shall not have to wait as long a time for his next one. I also wish to congratulate the noble Lord, Lord Rugby, whom I do not know so well, on what I thought was a most valuable contribution to the debate, and I hope that he too will be a frequent contributor to our discussions.

I find that the recommendations to improve the lot of small firms do in fact have some merit. I am the chairman of three small firms and, to that extent, perhaps I should declare an interest. Each of the firms is concerned with the development of an area of very advanced technology and each spends far too much of the time which should be devoted to development seeking the money with which to do it. I am therefore glad that in his introductory remarks the noble Lord, Lord Peart, mentioned the general problem of the high technology small firm. In my experience what these small organisations need above all else is risk capital, and the ACARD report makes it quite clear that private risk capital is rarely available in the United Kingdom.

The effect of taxation upon the ability of the private individual to supply risk capital has been mentioned several times this afternoon, and on page 24 of the report it is underlined most emphatically. If, too, one goes, as one occasionally does, to a merchant bank, the first demand is usually for a set of the last few annual reports so that the bank can get a clue to the profit record of the company. Of course that is not of much use to a company which is just starting up and is looking for assistance. This matter is dealt with to some extent—and very cleverly—by Mr. William Kingston in his submission to the Wilson Committee, which I read with great interest but perhaps not complete understanding. It is Annexe II of the ACARD report.

Along with the ACARD working party, I believe that we have reached a point in our complex and financially inadequate system of backing innovation at which drastic change is necessary. This change when it is codified—and I hope it will be—should be based partly on the recommendations of the ACARD report and partly on Mr. William Kingston's recommendations, but it must include, whether by direct arrangements or by taxation incentives, the provision of real risk capital.

Whatever changes are made, directly or by tax change, to ease the flow of risk capital into innovative enterprises, somewhere in the administrative chain between the request for aid and the decision on whether or not to grant it there will have to be a judgment. That judgment will be made by officials, whether they be government officials or institutional officials. One would like to be sure that the judgment will be made by people who are well qualified to judge. It seems to me that, whatever system evolves, government will be involved and, with all respect, engineering judgments by government and by institutions (with equal respect) have, in my view, too often been unimaginative and over-cautious in the past.

Basically, the ACARD report seeks to provide risk capital, and risk and caution cannot very well go hand in hand. We shall need a new spirit in official and institutional circles—I hope an adventurous spirit. We shall need, too, critics who are well informed in the areas in which the prospects have to be evaluated and in which decisions have to be made. I believe that in the past governments have been severely handicapped in that their departmental organisation does not automatically provide the kind of judge I mean. Unlike the civil services of France and Germany, senior administration here does not automatically include scientists and technologists. Engineers from our universities, unlike the graduates from Ecole Polytechnique do not naturally flow into the administrative levels of the civil service and the financial institutions. I believe that, in parallel with reforms such as are urged in the report, we should once again—we have tried before—attempt to remedy a situation which to me indicates a serious defect in our system.

The noble Lord, Lord Gregson, mentioned the lack of engineers and designers in industry. Equally there is a lack of them in the higher administration of our civil and institutional services. Indeed, if as a result of the examination of the report we decide, either through the mechanism of a Select Committee such as the noble Lord, Lord Shackleton, mentioned or by other means, to reform our attitudes towards and methods of supporting research and development, we should carry the reform beyond the area of the report in yet another direction as well. We should look not only at the scale of our expenditure on research and development but at the distribution of that expenditure. That ACARD is conscious of this is evident from paragraph 2.3 of the report. It might, for example—and I emphasise that this is an example, not a proposal—with the energy problem at the end of this century so firmly before us, be more profitable for the United Kingdom to spend less on nuclear fusion research and more on research into mining coal faster.

Behind all the suggestions for change there lies of course the wish to create wealth more rapidly than we do now. We can only satisfy without inflation legitimate desires for higher wages by creating wealth a great deal faster. This can be done inter alia by innovating faster. But it will be no good finding ways to accelerate innovation unless there is a receptive attitude in industry to innovation and change. The dependence of wealth creation on innovation and productivity must somehow be understood at all levels in industry if we are ever again to take full advantage of our undoubed inventive and innovative talents.

What we are saying today, like the recommendations of the ACARD document, inevitably implies criticism of things as they are. I want to say, therefore, that I know from long experience inside Government—departments I was for many years a civil servant—and outside government departments that the organisations which exist to assist innovation help to the very best of their abilities. They are, however, restricted in ways that I have indicated by the frameworks within which they have to operate. I should not like my remarks today to be taken amiss by bodies from which I have received deeply appreciated help in the past. Here I have in mind not only Government Departments but the NRDC and the NEB. I, or rather organisations with which I am connected, have had help from all these bodies. Like the rest of us, I have been particularly pleased about the success of the NRDC. It had small beginnings and its ability to help was inevitably for some years on a limited scale. It is still not a large organisation, but it has had notable successes, of which the most spectacular are to me the hovercraft and the wonder drug cephalosporin.

The NRDC has become a powerful instrument of great value to the nation and certainly my submission that there are not enough scientists and technologists in senior administration does not apply to the NRDC. That is one of the reasons for its success. It comes in for some criticism in paragraph 4.7 of the report and I hope it will as a result make its capacity and its overall policy more publicly known than it has been so far. I hope that the speech of the noble Lord, Lord Schon, today will have more publicity than I am afraid it is likely to get at the present time.

In so far as there needs to be, as is suggested in paragraph 4.8, a definition of the relative rôles of NRDC and NEB, I must say that I thought the position was already reasonably clear. The NRDC may support novel inventions which may or may not come to commercial fruition: the NEB may support existing companies which need capital for expansion or in some cases survival.

Perhaps this is not quite the best time to be asking the Government to give their utmost sympathy to the ACARD recommendations and their earnest consideration to what noble Lords are saying today; they can be forgiven for being preoccupied with other matters. But, however various the views we have on the performance of the Government, I think there is one matter on which we can all congratulate them—and I feel that the noble Lord, Lord Carr, would agree in this—and that is on the setting up of ACARD. I feel sure that that was a good thing and, in producing this report, I believe ACARD has done something extremely valuable. I think the noble Lord the Leader of the House must be pleased with his team.

5.22 p.m.

The Earl of HALSBURY

My Lords, like others who have spoken I should like to express my gratitude to the noble Lord, Lord Gregson, for initiating this debate; and I should also like to apologise to him because I missed the first two minutes of his speech. I was preoccupied with the business of the House this morning, and had to attend to a small, force-3 domestic crisis in the lunch-hour, which necessitated my being here a few minutes late. My Lords, I think we have had two very remarkable maiden speeches from my noble friends Lord Schon and Lord Rugby; and if I concentrate rather more on Lord Schon's speech than on Lord Rugby's it is because, as one innovator to another, I shall look forward to discussing innovation with him at a later stage. The speech of the noble Lord, Lord Schon, was wise, witty and modest, and I am sure that his expression of loyalty to a protector for his protection touched your Lordships' hearts. Gratitude is one of the highest of the human virtues, and I am sure we are as keen to have Lord Schon among us as a citizen and a Member of your Lordships' House as he is to be a British citizen at this day.

Our paths crossed a long time ago, earlier than either of us knew. He told your Lordships how at the Deutsche Hydriawerke he was concerned with the development of the first of the non-soapy detergents—nowadays called detergents although, in the strict sense of the word, soap is itself a detergent. I read about this work when I was a young chemist, and I thought it was so original that I wanted to do something like it. At the time when Lord Schon was arriving here in this country I had just got going on Merseyside the Halsbury process as an alternative for making these particular classes of detergents. I had had a very tough time in collecting the money necessary to build the first plant. I slightly bent the local rules, which said that I could get by with local sanction provided I did not spend more than £500. I built the first plant for £500 out of the collective scrap yards of Merseyside. The war promptly broke out, bringing us Lord Schon with it, and I found myself the possessor of a monopoly market, and that £500 plant earned £10,000 net profit in its first year. Later, it was a great pleasure to know that Lord Schon had inherited the organisation of which I was managing director in its modest beginnings.

Coming now to the circumstances of our debate, the noble Lord, Lord Carr, said that he agreed with the analytic substance of what was in this report; and the noble Earl, Lord Shannon, said what a pity it was not all said 30 or 40 years ago. If the noble Earl had said 20 or 30 years ago, I could have replied, "Yes, but it was said. I have been saying it for the last 20 or 30 years myself". I published it in The Times, in the Financial Times, in the Daily Telegraph and in innumerable trade journals; I have made broadcasts on it, and I have been on television on it. There is nothing in this report that I could not have written 20 years ago so far as the analytic side (praised by Lord Carr) is concerned. Then we come to the noble Earl's assumption that if it had been said 30 or 40 years ago it would have been acted on and we would not be where we are today. My Lords, it was said 20 or 30 years ago, so why was it not acted on? Why is it not being acted on?

It is because two essential matters are not referred to in this report—matters which are critical in the field of innovation. They are nothing to do with administration, and there is nothing the Government can do about them directly. One is imagination and the other is courage. These are not qualities you show in obedience to orders; they are qualities fostered by the environments you live in, granted a certain natural endowment in the first place. The individual and the environment in which he lives interact with one another dialectically, and each develops the qualities of the other. If you want to be an innovator, work in an innovative environment! If you want to have a healthy innovative industry, then back innovators! There is nothing so encouraging for the innovator as to have an environment that is backing him and has confidence in him. But, unfortunately, during the 20 to 30 years that the noble Earl, Lord Shannon, was talking about we have done everything to discourage and dishearten people. I come back over and over again to Prayer Time in your Lordships' House, when we ought to recite the General Confession, because if ever there was a body of men who have done all those things they ought not to have done, and left undone all those things they ought to have done, it is the legislative Assembly at Westminster. We continue to allow Governments to do all those things they ought not to do, and to leave undone all those things they ought to do.

With that, my Lords, having made I think quite a sufficient contribution by way of one good point, I should like to say that I entirely agree with the recommendation of the noble Lord, Lord Shackleton, that if the Standing Committee in the other place is to be dissolved then we should set up our own—and, my goodness!, what magnificent candidates we have in our maiden speakers this afternoon—and I hope we shall do so.

5.28 p.m.

Lord PEART

My Lords, with the permission of the House I should like to say a few words in winding-up. May I say first how delighted I was to hear the two maiden speakers. They were excellent in their knowledge; they knew what they were talking about, and they said it clearly. I wish I could have made as effective a speech when I made my maiden speech. I hope the noble Lord, Lord Rugby, will not mind if I stress the speech of the noble Lord, Lord Schon, because he is really my neighbour. He is Lord Schon of Whitehaven and I am Lord Peart of Workington. I think we have a better rugby league team than they have, but that is the only difference. But I was delighted to hear him speak here because he has done so much for this country. He has a lovely family, who I hope were here to listen to him; and his friends in Cumberland will read his speech with pride, because I am sure it will be in the West Cumberland News. If it is not, I will make sure that it has the widest publicity. So I was delighted with our two maiden contributors.

May I say to the noble Lord, Lord Carr, that probably I was a little hard on him. I know he is a reasonable and fair man. I believe that whatever Government are in power, they will have to continue the work of ACARD. I think this message was conveyed by Lord Kings Norton, who, after all, is Chancellor of Cranfield Institute of Technology, apart from being a previous scientific adviser to Governments. I listened carefully to his words.

I cannot take up every point that was raised; but I think the debate has been a useful and stimulating one, and has shown again the breadth of experience in this House and the value of the insight and judgment that it can bring to so many varied subjects. This is "the Lords" at its best. May I say, however, that industrial innovation is not just an interesting topic for debate, but a subject about which we cannot afford ignorance; it is a process which lies at the heart of our future prospects. This was emphasised over and over again by noble Lords. That is why I was pleased when the Advisory Council for Applied Research and Development decided that they ought to undertake a study and to report on it.

Mention has been made about the need to publicise the authors of the report. I will look into that. That is a fair point. I have noted what the noble Lord, Lord Shackleton, had to say in his very full speech—and, after all, he is the chairman of the Select Committee—about the need to have a similar Select Committee here, if something should happen to the Select Committee in the other place. I think that your Lordships could do this job very well. We have the people who could serve on that committee. I think it is a point worth considering.

As I mentioned in my opening remarks, the Government have welcomed the report. Its informed analysis gives valuable support to many aspects of industrial strategy, and on a number of its recommendations action is under way. Other recommendations are still under examination; although, as I explained, it may not be possible to accept every one of the advisory council's proposals. But I shall take away for consideration by my colleagues a number of points which have been made. It was a stimulating debate and I was glad at the number of speakers who emphasised that the best machinery and methods are of little use without the right men to operate them. There is a need for a change in national opinion towards engineering. This point was taken up again by the noble Lord, Lord Kings Norton. I agree with him. I believe that this is important in our society. There is too much snobbishness about the idea of a pure science degree, academically; but we do not want pure scientists, we need many more engineers. This is why America is so successful, whether we like it or not, the Japanese and also the Soviet Union, where the engineer has an important role in that society.

My Lords, we need to change national opinion towards engineering and to increase the supply of trained manpower at all levels. This is recognised in the council's report as a vital part of any programme. As noble Lords know this whole subject is currently under consideration by the Finniston Committee which should be reporting this year. The Government are supporting and encouraging promising schemes such as the Department of Industry's and the Science Research Council's Teaching Company arrangement and the new engineering bursaries scheme.

I should like to pay a tribute to the work of the universities and the polytechnics highlighted by the council in providing courses and training outside their regular degree and diploma work which provide an opportunity for mature managers and workers to obtain the regular updating and retraining which is so necessary. This debate, as I have said, is so important. Our exchanges today will be, I hope, only the beginning of a wider debate. Already I can inform the House that the Institution of Mechanical Engineers has organised a joint discussion evening with the Institute of Electrical Engineers and the Engineering Employers' Federation on 3rd April to allow the message of this report to be considered across a wide range of industry. No doubt, we shall see further similar initiatives.

My Lords, I say to all noble Lords who have spoken that I shall look carefully at what they have said. This has been a fine debate. I say: "Long may ACARD continue to provide its valuable contribution to what we are doing now!"

5.34 p.m.

Lord GREGSON

My Lords, may I first say how pleased I am that the noble Lord, Lord Peart, in his more usual role, has assured us that the Government are taking this report to heart and that the report has been well received by them. I should like also to thank all noble Lords who took part in the debate. I think that the debate itself stood up well to the very high standards of this House in the many contributions that were made. I should like particularly to add my congratulations to the two excellent maiden speakers this afternoon. I can only say that their contributions were absolutely on line with the subject I put down in the Motion and I am grateful for their contributions to this debate.

I would also say that they made me envious that I could not go back and make my own maiden speech again. As a last comment, perhaps your Lordships will forgive me if I report another apparent shortage of industrialists, scientists and technologists on all the Benches opposite. My Lords, I beg leave to withdraw my Motion.

Motion for Papers, by leave, withdrawn.